Question

The percentage of interest actually being paid by the borrower for the use of the money, as distinct from nominal interest is called

A. Real interest rate
B. Nominal interest rate
C. Effective interest rate
D. Compound interest rate

Answer 1

The percentage of interest actually being paid by the borrower for the use of the money, as distinct from nominal interest, is called the Real interest rate. It is calculated by subtracting the rate of inflation from the nominal interest rate.

Step-by-step explanation:

The percentage of interest actually being paid by the borrower for the use of the money, as distinct from nominal interest is called Real interest rate. The real interest rate is calculated by subtracting the rate of inflation from the nominal interest rate. For example, if the nominal interest rate is 7% and the rate of inflation is 3%, then the borrower is effectively paying a 4% real interest rate.